Slide 1: Q2 2009 results – Investor update
July 29, 2009 Q2 2009 results – Investor update
Slide 2: Agenda
Agenda 1. AkzoNobel at a glance 2. Strategic ambitions and action plans 3. Q2 Highlights and operational review 4. Q2 Financial review 5. Outlook and medium term targets
Slide 3: AkzoNobel key facts
AkzoNobel key facts 2008 • Revenue €15.4 billion • 61,300 employees • EBITDA: €1.9 billion1 • EBIT: €1.4 billion1 • Credit ratings: BBB+ (S&P) and Baa1 (Moody’s) Revenue by business area EBITDA1 by business area 29% 27% 37% 44% Performance Coatings 29% Decorative Paints 34% Specialty Chemicals 1. Be
Slide 4: AkzoNobel is the world's largest Coatings supplier
AkzoNobel is the world’s largest Coatings supplier 2008 revenue in € billion 10 8 6 4 2 0 s n t t r co nt G el SF on in pa am tu PP ai ob Pa as Jo uP ls BA P illi M Va oN n ai D -W po ns kz in ip Ka A w N er Sh Q2 2009 results 4
Slide 5: Excellent geographic spread of both revenue and profits
Excellent geographic spread of both revenue and profits Emerging markets are important (36% of revenue) % of 2008 revenue 40% 22% 7% ‘Mature’ Europe 20% North America ‘Emerging’ Europe Asia Pacific 8% Latin America 3% Rest-of-world Emerging markets profitability is strong (45% of EBIT) Q2 2009 resul
Slide 6: We have strong brands across the full spectrum of our business
We have strong brands across the full spectrum of our business Biggest brands, per business area % of 2008 revenue 25% of Decorative Paints 23% of Performance Coatings 18% of Specialty Chemicals Q2 2009 results 6
Slide 7: Strong emerging markets growth potential
Strong emerging markets growth potential Mature Emerging Per Capita Per Capita Architectural 8 liters < 2 liters Paint Industrial and Special Purpose 13 liters < 6 liters Coatings Plastics ~100 kg ~20 kg ~170 ~170 kg kg ~25 ~25 kg kg Paper Source: Food & Agriculture Organization of the UN, 2005 data
Slide 8: We continue to successfully innovate
We continue to successfully innovate Weathershield BackPack Roller System® • Complete painting system, combines the power of a pump to dispense and control paint from specially designed packs. UV LED spray gun for Autoclear® UV • Automotive spray gun introduced in May which paints and cures at the s
Slide 9: Low fixed costs as a percentage of revenue
Low fixed costs as a percentage of revenue % of annual revenue, indicative 100% Raw materials, energy, and other variable production costs Fixed production costs Selling, advertising, administration, R&D costs EBIT margin 0% Decorative Performance Specialty AkzoNobel Paints Coatings Chemicals Q2 200
Slide 10: Sustainability is integrated in everything we do
Sustainability is integrated in everything we do We have set ambitious sustainability targets: • Remain in the top three in the Dow Jones Sustainability Indexes • Reduce our total recordable injury rate • Deliver a step change in people development We focus on long-term performance. By 2015 our ambi
Slide 11: Strategic ambitions and action plans
Strategic ambitions and action plans
Slide 12: AkzoNobel strategic ambitions
AkzoNobel strategic ambitions Leading in value creation • Outgrow our markets • EBITDA margin > 14 percent by end 2011 • 0.5 percent improvement in operating Tied to incentives, working capital (OWC) level, p.a. both for value creation and Leading in sustainability sustainability • Top 3 Dow Jones S
Slide 13: Delivering the EBITDA margin ambition
Delivering the EBITDA margin ambition EBITDA margin, indicative 18 12 6 0 2008 ICI Organic Margin Operational End performance synergies growth management effectiveness 2011 Q2 2009 results 13
Slide 14: Key components of the strategic action plan
Key components of the strategic action plan ICI synergies • €340 million structural cost savings • Delivered more rapidly than originally planned Organic growth • Leveraging our strong emerging markets positions for growth • Emphasis on focused, bigger, bolder innovation Margin management • Centrali
Slide 15: Q2 Highlights and operational review
Q2 Highlights and operational review
Slide 16: Q2 Highlights
Q2 Highlights • Ongoing significant volume pressure • Strong company-wide focus on customers, costs and cash • Margin management and cost restructuring bearing fruit • Operating working capital reduced • Forward visibility remains limited Q2 2009 results 16
Slide 17: Financial overview Q2 2009
Financial overview Q2 2009 • Revenue declined 10 percent to €3,668 million • Volumes down 16 percent (Q1 2009: 17 percent) • ICI integration and additional restructuring well on track • Innovation, margin management and cost reduction underpinned EBITDA margin • EBITDA before incidentals of €527 mil
Slide 18: Revenue growth and margin development per quarter to Q2 2009
Revenue growth and margin development per quarter to Q2 2009 Reported revenue in % year-on-year 10 5 3 0 (5)% (14)% (8)% (10)% 0 -5 -10 -15 Decorative Paints Performance Specialty AkzoNobel Coatings Chemicals EBITDA margin in % 20 15.8% +1 16.6% 14.6 13.1% 14.4% 15 +9 12.5 10 5 0 Decorative Paints P
Slide 19: Q2 2009 revenue
Q2 2009 revenue € million Q2 2009 Δ% Revenue constant currencies 3,655 (10) Revenue reported 3,668 (10) Revenue development Q2 2009 vs. Q2 2008 0 -2 -4 -10% -6 -8 -16% +1% -10 -12 +5% -14 -16 Volume Price Acquisitions/ Currency Total divestments Increase Decrease Q2 2009 results 19
Slide 20: Summary - Q2 2009
Summary - Q2 2009 € million Q2 2009 Δ% Revenue 3,668 (10) EBITDA* 527 (9) Amortization and depreciation (157) Incidentals (55) Financial income & expense (89) Minorities and associates (14) Income tax (70) Net income continuing operations 142 (24) Discontinued operations 13 Net income 155 (13) € mil
Slide 21: Incidentals
Incidentals € million Q2 2009 Q2 2008 Restructuring costs (71) (12) Transformation costs (4) (72) Charges related to major legal, antitrust & environmental cases 7) (2) Results on acquisitions & divestments 3) (1) Other incidental results 10) -) Total (55) (87) • Significant amount of restructuring
Slide 22: EBITDA – Cash bridge
EBITDA – Cash bridge € mln Q2 2009 Q2 2008 EBITDA before incidentals 527) 577) Incidentals (cash) (54) (37) Change working capital 77) (143) Change provisions (28) (148) Interest paid (112) (107) Income tax paid (99) (64) Net cash from operating activities 311) 78) • Working capital improvements und
Slide 23: We are delivering on synergies and cost reduction
We are delivering on synergies and cost reduction Cumulative annualized savings € million 600 500 200 400 300 182 200 340 340 67 67 37 37 137 100 188 137 137 97 0 FY 2008 actual Q1 2009 actual Q2 2009 actual FY 2011 target ICI synergies Additional restructuring Total cost savings targeted of at leas
Slide 24: ICI synergies and additional restructuring on track
ICI synergies and additional restructuring on track 2008 – Q2 2009 ICI Additional Total synergies restructuring Net FTE 1,325 1,560 2,885 reductions* Cash costs 115 128 243 (€ million) Annualized savings 188 182 370 (€ million) We will continue to pursue efficiency improvements: • Alignment of manuf
Slide 25: Operational review Decorative Paints
Operational review Decorative Paints Weathershield BackPack Roller System® Complete painting system, combines the power of a pump to dispense and control paint from specially designed packs. Q2 2009 results 25
Slide 26: Decorative Paints key facts
Decorative Paints key facts 2008 • Revenue €5.1 billion • 24,000 employees • EBITDA: €593 million1 • 32 percent of revenue from emerging markets • Largest global supplier of decorative paints • Many leading positions, strong brands Some of our strong brands Revenue by geography 18% 49% 33% Asia Paci
Slide 27: Leading Deco positions in all regions with strong brands
Leading Deco positions in all regions with strong brands AkzoNobel market positions 1 2/3 >3 Export countries Source: Euromonitor basis; AkzoNobel analysis 2008 Q2 2009 results 27
Slide 28: Combination of channel and application mix creates a relatively stable market
Combination of channel and application mix creates a relatively stable market % of total Decorative market 2008 Market breakdown Market breakdown by channel by application ~70% ~50% ~50% ~30% Retail Trade New build Maintenance Source: Euromonitor basis; AkzoNobel analysis Q2 2009 results 28
Slide 29: Decorative Paints highlights Q2 2009
Decorative Paints highlights Q2 2009 • Synergy programs and restructuring ahead of plan, net workforce reduced by more than 2,100 employees (8 percent) compared with 2008 • Europe - trade segment continued weakness, retail business more resilient • Americas - US paint market soft demand continued, c
Slide 30: Decorative Paints Q2 2009
Decorative Paints Q2 2009 € million Q2 2009 Δ% Revenue constant currencies 1,325 (4) Revenue reported 1,320 (5) EBITDA* constant currencies 177 (9) EBITDA* reported 173 (11) Ratio, % Q2 2009 Q2 2008 EBITDA* margin reported 13.1 14.1 Revenue development Q2 2009 vs. Q2 2008 0 -2 -5% -4 -10% -6 -8 +4%
Slide 31: Operational review Performance Coatings
Operational review Performance Coatings UV LED spray gun for Autoclear® UV Automotive spray gun introduced in May which paints and cures at the same time. No warm up time, up to 25 percent less energy used during total repair. Q2 2009 results 31
Slide 32: Performance Coatings key facts
Performance Coatings key facts 2008 • Revenue €4.5 billion • 21,000 employees • EBITDA: €546 million1 • 42 percent of revenue from emerging markets • Leading positions in performance coatings • Innovative technologies, strong brands Revenue by business unit Revenue by geography 3% 8% 7% Industrial F
Slide 33: Many market leadership positions
Many market leadership positions 1 Wood Industrial Coil 2 Adhesives Finishes Specialty Plastics 1 1 Powder Coatings Powder 1 Marine and Marine 2 Protective Protective Yacht Aerospace Car 3 Refinish Automotive OEM plastic Refinishes commercial 5 coatings 1 2 Packaging Beer & Food cans Coatings bevera
Slide 34: Performance Coatings highlights Q2 2009
Performance Coatings highlights Q2 2009 • Cost levels decreased as restructuring programs gathered pace • Strong performance in Marine and Protective Coatings & Packaging Coatings • Industrial Activities completed the closing or restructuring of 8 production sites in mature markets, continues to ali
Slide 35: Performance Coatings Q2 2009
Performance Coatings Q2 2009 € million Q2 2009 Δ% Revenue constant currencies 1,035 (14) Revenue reported 1,041 (14) EBITDA* constant currencies 162 (4) EBITDA* reported 164 (2) Ratio, % Q2 2009 Q2 2008 EBITDA* margin reported 15.8 14.0 Revenue development Q2 2009 vs. Q2 2008 0 -5 -14% -10 -19% -15
Slide 36: Operational review Specialty Chemicals
Operational review Specialty Chemicals Rediset™ asphalt additive Significantly reduces the mixing and paving temperatures, creating fuel savings and reducing operational costs. Also results in lower asphalt fumes, providing better working conditions for the paving crew. Q2 2009 results 36
Slide 37: Specialty Chemicals key facts
Specialty Chemicals key facts 2008 • Revenue €5.7 billion • 13,300 employees • EBITDA: €891 million1 • 35 percent of revenue from emerging markets • Major producer of specialty chemicals • Leadership positions in many markets Revenue by business unit Revenue by geography Functional Chemicals 2% 8% 9
Slide 38: Many market leadership positions
Many market leadership positions 1 Retention Pulp 2 and sizing Bleaching chemicals and Paper chemicals (globally) 1 1 Chlorine Industrial Monochloro- Merchant 2 Caustic acetic acid & salt merchant Chemicals (MCA) (Europe) (Europe) 1 Chelates & Functional micronutrients, 2 3 Salt sulfur products Ethy
Slide 39: Specialty Chemicals highlights Q2 2009
Specialty Chemicals highlights Q2 2009 • Cost and cash savings initiatives contributed in all businesses • Surface Chemistry and Polymer Chemicals results remain under pressure • Strong performance in Pulp and Paper & Functional Chemicals • Industrial Chemicals acquisitions to a large part offset th
Slide 40: Specialty Chemicals Q2 2009
Specialty Chemicals Q2 2009 € million Q2 2009 Δ% Revenue constant currencies 1,306 (9) Revenue reported 1,318 (8) EBITDA* constant currencies 209 (12) EBITDA* reported 219 (8) Ratio, % Q2 2009 Q2 2008 EBITDA* margin reported 16.6 16.6 Revenue development Q2 2009 vs. Q2 2008 0 -5 +4% +1% -8% -10 -18%
Slide 41: Financial review
Financial review
Slide 42: Cash management discipline
Cash management discipline • OWC reduction Focus on • Capex prioritization cash • R&D stable • Only bolt-on acquisitions • Dividend policy unchanged • OWC reduced to 16.3% of revenue (Q2 2008: 17.1%) • Careful prioritization of Capex • We continue to look for attractive bolt-on acquisitions • Divide
Slide 43: Continued focus on Operating Working Capital
Continued focus on Operating Working Capital OWC € million 2900 20% 2800 19% 18% 2700 17% 2600 16% 2500 15% 2400 14% 13% 2300 12% 2200 11% 2100 10% 2Q08 3Q08 4Q08 1Q09 2Q09 OWC OWC as % of revenue Q2 2009 results 43
Slide 44: Ambition to maintain strong credit rating unchanged
Ambition to maintain strong credit rating unchanged € million Jun 30, 2009 Dec 31, 2008 Equity 8,139 7,913 Net debt 2,584 2,084 • Equity influenced by currency translation from the £ (+€352 million), net profit (+€186 million) and dividend payment (-€353 million) • Net debt increased due to capital
Slide 45: Pension deficit development
Pension deficit development First half year of 2009 € mln Pension funding deficit year-end 2008 (988) Top-ups into UK funds 250 Pension costs net of regular contributions (47) Net Balance sheet provision end Q2 2009 (785) Plan asset returns below expected (125) Increased DBO due to higher inflation
Slide 46: 2009 pension costs update
2009 pension costs update • UK top-ups in 2009 expected at around €250 million (₤215 million, 2008 Report guidance ₤197 million), following funding valuations for the ICI plans. • Total 2009 cash pension contributions (including UK top-ups) of €370 million (2008 Report guidance €304 million) expecte
Slide 47: Debt maturities lengthened
Debt maturities lengthened No major bonds maturing before 2011 Debt maturity, € million 1,200 800 400 0 2009 2010 2011 2012 2013 2014 2015 2016 € bonds $ bonds GBP bonds Strong liquidity headroom • Undrawn revolving credit facility of €1.5 billion available (2013)* • €40 million drawn under commerci
Slide 48: Medium-term targets
Medium-term targets
Slide 49: Well positioned to meet current challenges
Well positioned to meet current challenges Sound fundamentals • Strong positions in diverse, highly attractive sectors • Attractive geographic spread • Strong operating cash flow Actions • Continued focus on customers • Rigorous cost restructuring • Cash protecting measures • Prudent capital allocat
Slide 50: Outlook and medium term targets
Outlook and medium term targets • Forward visibility remains limited, due to continuing uncertain economic development. We continue to expect that 2009 will be a challenging year Nevertheless, we remain focused on: • working towards our medium-term target of an EBITDA margin of 14 percent by the end
Slide 51: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements which address such key issues as AkzoNobel’s growth strategy, future financial results, market positions, product development, products in the pipeline, and product approvals. Such statements should be carefully considered, and it should be
Slide 52: Appendix
Appendix
Slide 53: Q2 2009 results
Q2 2009 results € million Q2 2009 Δ% H1 2009 EBITDA* constant currencies 519 (10) 823 EBITDA* reported 527 (9) 823 Net income before FVA ** 207 (31) 235 Net income total operations 155 (13) 148 Ratio Q2 2009 Q2 2008 H1 2009 EBITDA* margin reported (%) 14.4 14.1 11.9 Earnings per share (in €) 0.67 0.